The SHIELD Act doesn’t go far enough: protect victims of all patent aggressors, not just “trolls”

byStephan KinsellaonMarch 1, 2013

Patent and other forms of IP law, like the state itself from which they emanate, are subject to the “ratchet effect” described years ago by Robert Higgs: there is a tendency for the laws to expand and get worse and worse. Thus we see the expansion of patent scope to cover software; and the gradual increase in copyright scope (software, boat hull designs, maybe fashion designs coming up) and terms, and the elimination of formalities like copyright notice and the requirement to register copyright; the addition of “antidilution” to trademark law and private [sic] domain-name dispute rules that allow private parties to take others domain names using trademark law; the federal criminalization of trade secret law. We now have a private [sic] six-strikes and you’re out regulations and SOPA-type laws attempted and reintroduced over and over.

Any rolling back or improvement in any of these laws is a rare thing. The only significant in any form of IP in all of American history that I can think of is the provision of a broader “Prior Commercial User Defense” for patent infringement in the 2011 America Invents Act (see The American Invents Act and Patent Reform: The Good, the Meh, and the Ugly). Of course, even this defense makes exceptions if the patent plaintiff is a US university (35 USC § 273(c)(2)), and it provides no defense for the independent inventor. But it’s at least an improvement. And of course the AIA made things worse too: it watered down the best mode defense and penalties for false marking. And it wasted an opportunity to make overhaul the patent system.

But why should only patent trolls—so-called non-practicing entities (NPEs)—have to pay the legal costs of defendants, when they lose? Under current patent law, there is no “use” or “working” requirement; there is no real “reduction to practice” requirement. This is why patent trolls can exist: there is no requirement to make and sell a product covered by your patent. In fact, it is hard to imagine how there could be such a requirement, since a patent is only a right to exclude, not a right to make the invention described; for example, if I have a patent on an improved smartphone, making the smartphone might still infringe Apple’s patents, so I would be unable to make my improved device. A working requirement would make no sense in such case since it basically means it’s impossible to obtain or enforce a patent if it is an improvement on previously patented technology, which is contrary to the entire purpose of patent law. Still, I’d be in favor of it, as it would reduce the overall amount of patenting and patent assertion, and throw a monkey wrench into the workings of patent law (this is why I proposed it in Reducing the Cost of IP Law).

But the point is that permitting patent trolls to exist (by not having a “use” or “working” requirement) and then singling them out for special treatment when it comes to payment of the winning defendant’s legal fees makes no sense whatsoever. “Practicing entities” like Apple can do as much or even more harm than patent trolls when they swing their weight around.

The assumption in the criticism of patent trolls is that so long as you use a patent that covers one of your products, against your competitors, this is okay. But why? This is even worse than what patent trolls do. Patent trolls just want a small fee. They want to “wet their beak,” like a mafia guy. They don’t want to kill the businesses they are trying to parasite off of. By contrast, Apple would love to get injunctions against and totally demolish any competitor making a smart phone “too similar” to their own product. (See Patent trolls as mafioso (and that’s a compliment).)

It only makes sense that companies like Apple ought to have to reimburse the victim of its attempt to use patent law to quash competition if it loses the suit, for whatever reason. The SHIELD Act should extent to all patentees, not just “non-practicing entities.” (Which I proposed previously in Reducing the Cost of IP Law.)

If we can’t end it, we should at least mend it. Losing patent plaintiff pays: period.

The Center for the Study of Innovative Freedom (C4SIF) is dedicated to building public awareness of the manner in which laws and policies impede innovation, creativity, communication, learning, knowledge, emulation, and information sharing. We are for property rights, free markets, competition, commerce, cooperation, and the voluntary sharing of knowledge, and oppose laws that systematically impede or hamper innovation, especially those enforced in the name of defending “intellectual property,” such as patent and copyright; these should be radically reformed or entirely abolished.

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